Hong Kong’s economic transformation is at a critical juncture, and the private sector must adapt along with it, as Chief Executive John Lee Ka-chiu has noted. In the first of a two-part series, Ambrose Li and Wynna Wong examine the forces driving change among established enterprises.

Before visiting a vendor in mainland China’s Jiangsu province, a salesman from Hong Kong bottling giant Swire Coca-Cola can now use a mobile phone to see which drinks customers in the neighbourhood are most likely to buy. The recommendations, generated by artificial intelligence (AI) and based on factors such as the area’s consumer profiles, turn information held across the firm’s operations into what Swire Coca-Cola calls “suggested orders”.

Swire Coca-Cola’s mainland plants are also using AI-powered robots that can make decisions and adapt to changing operating conditions as they pick and sort heavy, shrink-wrapped loads of drinks from pallets at high speed – a breakthrough in the labour-intensive industry. These were some of the cutting-edge technologies Swire Coca-Cola had piloted on the mainland to transform its business, while looking to scale them to other provinces and even to Southeast Asia through and in Hong Kong, chief executive Karen So told the South China Morning Post.

“Due to our geographic coverage, we’re exposed to many geopolitical risk factors which we have to manage,” So said, adding that one of the most obvious recent impacts had been rising raw material costs, including those of aluminium and sugar.

“We have to stay very vigilant. Overall, we’ve had to make sure our brand and operations stay relevant in the past few decades to mitigate our external risks,” she said. The company, which started business in 1965, is now the fifth-largest Coca-Cola bottling partner in the world.

As Hong Kong’s inaugural five-year plan sets out the blueprint for the city’s economic upgrade, businesses like Swire Coca-Cola are working to future-proof themselves against geopolitical headwinds and compete in an increasingly challenging environment.

City leader John Lee Ka-chiu last week urged Hongkongers and businesses to adopt a long-term vision, saying enterprises had to stay competitive even as the government rolled out measures to cultivate new growth drivers for the city.

“While the government works hard, business operators need to think of ways themselves because, after all, this is a highly competitive society,” he said.

Hong Kong’s economy has powered ahead in recent months, with merchandise exports hitting record highs on the back of overseas demand for AI-related products.

The government has consequently upgraded its 2026 full-year economic forecast to 3.5 per cent to 4.5 per cent, from an earlier projection of 2.5 per cent to 3.5 per cent.

The government has consequently upgraded its 2026 full-year economic forecast to 3.5 per cent to 4.5 per cent, from an earlier projection of 2.5 per cent to 3.5 per cent.

Despite the stronger overall performance, streets are dotted with shuttered shops while retailers and restaurant operators continue to struggle.

In a high-profile warning, real estate advocacy group Momentum 107 said the sharp decline in shop values in recent years had rapidly eroded the pool of available capital, undermining confidence in investment and consumption.

It noted that shop prices had fallen by more than 40 per cent from their 2018 peak, while the overall vacancy rate had reached a 40-year high of 12.5 per cent in late 2025. The retail and food and catering sectors have also been hit by the continuing trend of Hongkongers crossing the border to spend their leisure time and money.

Meanwhile, inflation has been on the rise.

After war broke out in the Middle East on February 28 and triggered a global oil crisis, the city’s inflation rate jumped from 1.1 per cent year on year in January to 1.7 per cent in February and has hovered above 1.7 per cent as of August. Vera Yuen Wing-han, a lecturer in economics at the University of Hong Kong, noted that looking solely at struggling high-street shops overlooked the bigger picture, as high-value sectors such as professional services and finance continued to drive the economy. However, consumer-facing sectors are undergoing structural shifts as mainland competitors catch up and local consumers spend more elsewhere.

“Hong Kong’s local consumption market is relatively small, so retail and catering suffer from northbound spending and changing habits,” Yuen said.

“Conversely, high-end services, technology and finance are holding up strong. But across the board, businesses rely heavily on international trade and foreign clients, leaving them exposed to global geopolitical frictions.” Kenny Shui Chi-wai, vice-president of Our Hong Kong Foundation think tank and executive director of its Public Policy Institute, said companies faced three main challenges – high operating costs, disruption to global supply chains and geopolitical risks and barriers to technological transformation caused by shortages of funding and skilled workers.

“Conversely, high-end services, technology and finance are holding up strong. But across the board, businesses rely heavily on international trade and foreign clients, leaving them exposed to global geopolitical frictions.” Kenny Shui Chi-wai, vice-president of Our Hong Kong Foundation think tank and executive director of its Public Policy Institute, said companies faced three main challenges – high operating costs, disruption to global supply chains and geopolitical risks and barriers to technological transformation caused by shortages of funding and skilled workers. He said Hong Kong’s rents, wages and logistics costs were relatively high, placing pressure on companies’ cash flow, while AI was creating another divide.

Large corporations often had money to invest but struggled to integrate new technology with legacy systems and secure cooperation across departments. While smaller businesses could be more agile, they frequently lacked capital and technical expertise.

Shui cited a Productivity Council survey suggesting about 90 per cent of responding companies intended to increase their use of AI. The problem, he said, was not a lack of interest but uncertainty over how to turn that intention into practical transformation. “Many people think of technology or AI as something that can help companies reduce costs and save money,” he said.

“But what is more important is how they can use AI to upgrade and transform themselves, innovate their business models or open up new markets.” Hong Kong appeared to be performing relatively well in adoption.

Shui cited a survey by Hong Kong University of Science and Technology that found that about 72 to 73 per cent of respondents used AI at work daily or weekly, compared with a global average of around 30 per cent.

Another study put AI adoption among Hong Kong firms at about 41 per cent compared with less than 30 per cent in Singapore, he said.

But widespread use did not mean that companies were applying the technology effectively.

Shui said the ideal outcome was “human-machine collaboration,” in which AI performed repetitive research, data processing and preliminary analysis, while employees devoted more time to decision-making and setting the company’s direction.

“If your competitor is already doing this while you are making very limited use of AI, it will be very difficult to catch up,” he said. “This is something that many companies and employees will need to learn.” Yuen echoed this view, saying that true AI adoption required a complete overhaul of corporate workflows rather than superficial daily tasks.

“The real productivity boost from AI isn’t just using it to write an email or draft a report – it comes when companies reshape their entire workflow from top to bottom,” Yuen said, comparing the current transition with earlier technological shifts such as the invention of the printing press, personal computers and the internet. “Legacy businesses face a dilemma because changing established processes while serving existing clients carries risk. It could take eight to 10 years for industries to truly integrate AI into their bottom line,” she added.

Shui said Hong Kong needed a coherent AI development blueprint and stronger cooperation between the government, universities and industry.

The planned Hong Kong Artificial Intelligence Research and Development Institute could provide a platform through which companies test applications, academics provide expertise and the government coordinates resources.

In Swire Coca-Cola’s case, So said transformation was robust across mindsets, strategies and business practices, pointing out that the 61-year-old business had in recent years embarked on a sweeping revolution.

“The future of our business lies in moving from reactive, manual operations towards proactive, data-driven ecosystems that respond to modern consumer habits,” she said.

The company’s “suggested order” system in Jiangsu province produced 20 per cent higher monthly sales volumes during a year-long pilot that ended earlier this year. She said it would be gradually rolled out to other markets, but conceded that it would take time for staff to get used to the AI tool.

“Our employees need time to adapt to tools designed to change how they make decisions and approach customers,” So said. The project forms a key part of a transformation at Swire Coca-Cola, whose franchise bottling and distribution operations reach more than 940 million consumers across the western United States, 11 mainland Chinese provinces and Shanghai, Hong Kong, Taiwan and four Southeast Asian countries.

The project forms a key part of a transformation at Swire Coca-Cola, whose franchise bottling and distribution operations reach more than 940 million consumers across the western United States, 11 mainland Chinese provinces and Shanghai, Hong Kong, Taiwan and four Southeast Asian countries.

The company’s transformation became more complicated as it expanded beyond its two main markets – Greater China and the US – into Southeast Asia. It acquired Coca-Cola bottling businesses in Cambodia in 2022, in Vietnam in 2023 and in Thailand and Laos the following year.

“When we acquired businesses from local operators of Coca-Cola in Southeast Asia, they had their respective enterprise resource planning systems,” So said. “We faced a challenge but also an opportunity to form a consistent operating system.” Even basic data definitions varied among markets, including what constituted a home market sales channel and how revenue was calculated.

The company had to clean up and standardise the information before it could perform reliable analysis to improve the decision-making process and help salespeople make more targeted calls. “The data alignment will take two to three years,” So said. Another tool transferred from the mainland to Southeast Asia was the smart cooler – a drinks refrigerator which customers unlock using an electronic payment code.

Scales and cameras identify which drinks are removed and customers are charged accordingly.

“The solution adapts technology and operating concepts proven in mainland China to the Hong Kong market, which combines digital payment and product-recognition capabilities to offer a seamless cashless purchasing experience,” So said.

In Hong Kong, the group has deployed 120 coolers across a broad mix of locations including sports and entertainment venues, workplaces, residential communities, educational institutions and industrial settings. So said the company aimed to replace traditional vending machines with these smart coolers.

Swire Coca-Cola’s regional expansion has also helped Chinese suppliers go global. Baosteel, China’s biggest listed steelmaker and a supplier of aluminium cans to Swire Coca-Cola on the mainland, established a factory in Ho Chi Minh City as the company expanded its presence there.

“It is a win-win situation – we have a stable supply of aluminium cans while Baosteel expands out of China for the first time,” So said.

“Hong Kong is where our ambition is set and our global system is run. A purpose-built solution developed in the Chinese mainland, and now ready to scale across the global markets we serve, shows the super value-added, superconnector role Hong Kong is positioned to play.” Shui said Hong Kong could also turn the technological rivalry between China and the West into an opportunity by developing a “dual-model” environment in which businesses could access systems from both sides.

“Hong Kong is where our ambition is set and our global system is run. A purpose-built solution developed in the Chinese mainland, and now ready to scale across the global markets we serve, shows the super value-added, superconnector role Hong Kong is positioned to play.” Shui said Hong Kong could also turn the technological rivalry between China and the West into an opportunity by developing a “dual-model” environment in which businesses could access systems from both sides.

“Hong Kong has always been a bridge connecting mainland China with the rest of the world,” he said. “If both systems can be used here, companies coming to Hong Kong can choose the tools that best meet their needs or potentially use both.” To raise efficiency and reduce manpower, Swire Coca-Cola has teamed up with a Hangzhou-based tech company, Seth Robotics, to develop its own AI-powered solution for its bottling plant in Zhengzhou, Henan province. The plants boasts the world’s first AI-powered intelligent picking-and-sorting robot, according to So.

Capable of picking 600 pallets of drinks an hour with 100 per cent accuracy in executing orders, and handling loads as heavy as 40kg, the robot works at twice the speed of manual labour.

Capable of picking 600 pallets of drinks an hour with 100 per cent accuracy in executing orders, and handling loads as heavy as 40kg, the robot works at twice the speed of manual labour.

“Normally after the first hour of work, workers need to take a rest. The robotic deployment will enhance efficiency and minimise any work-related injuries of workers, too,” So said.

She added that Swire Coca-Cola’s technology development also showed what a Hong Kong-headquartered company could contribute to embodied intelligence.

Against the backdrop of these operational investments, the group reported solid financial results for the first half of the year – net profit rose 5.35 per cent to HK$846 million (US$107.9 million) while revenue increased 8.36 per cent to HK$23.3 billion, compared with the same period last year.

Yet, as economist Vera Yuen noted, the rising cost of uncertainty left businesses with little choice but to adapt their models or risk falling behind.

Ultimately, she said, the question was no longer simply whether companies adopted new technology, but whether they could restructure their core operations to deliver genuine value to consumers.